Benefit check: why Germany is confronted with a welfare state fiasco (FT)

It is early afternoon when Helge Hofmeister reaches the Parkhotel Rödermarkt and heads for the cavernous bar.

A bulky man with a gun bulging through his untucked summer shirt, he has a date with "Pregnant Natasha", a Russian prostitute. But Mr Hofmeister is neither lonely businessman nor pimp. He is a civil servant going about his lawful business.

Pregnant or not, selling one's body is legal in Germany. But claiming unemployment benefits at the same time is not. And that, according to the file tucked under his arm, is what Natasha has been doing for months.

Mr Hofmeister, a former policeman, and his colleague, Helena Fürst, head of the new welfare-benefit fraud investigation unit in Offenbach, a quiet suburb of Frankfurt, have since November been fighting a battle they cannot win: to fix one of the most urgent economic, financial and political challenges facing Angela Merkel's grand coalitiongovernment.

A labour law nicknamed Hartz IV and hailed at its inception as the most radical structural reform in Europe since the era of Margaret Thatcher has become a case study in unintended consequences that casts a harsh light on the flaws in the way Germany makes policy. It has not only failed to dent unemployment but has also sent welfare costs spiralling, jeopardising the government's efforts to bring public finances under control and putting Ms Merkel's unwieldy left-right coalition under severe strain.

When an expert commission appointed by Gerhard Schröder, Ms Merkel's predecessor as chancellor, unveiled its blueprint for an ambitious labour market reform four years ago, Peter Hartz, a Volkswagen executive and chairman of the working group that drew it up, claimed the measures would halve unemployment.

Instead, in the 18 months since Hartz IV, the central plank of the reform, was introduced the number of recipients has rocketed from an initial estimate of 2.6m to just under 4m. In its first year, the benefit cost the state €25bn ($31bn, £17bn), or €10bn more than planned. And although the government took that into account when drafting this year's budget, overruns of up to €4bn are expected this year and next. Without drastic cuts, the 2007 federal budget is heading straight for a breach of the constitution, which bans borrowings from exceeding investments.

How could this happen? Clues can be found in Offenbach, the first German municipality to take action when fears of a massive increase in welfare-benefit fraud began to surface. "Hartz IV is an open invitation to rob the state," says Ms Fürst, a hard-bitten chain-smoker whose persistence once earned her the epithet "Hartz-Nazi" from an irate victim. Hartz IV merged two types of benefits - a generous wage-indexed payment for jobseekers who had worked in the past and a more basic form of income support for those who had never held a job - into one, flat-rate benefit that would apply to everyone who had been jobless for more than a year. The goal was to support the needy while "coercing" those capable of work back into the labour market.

But although Hartz IV meant a benefit cut for a minority, recipients of the old basic benefit, known as social assistance, found themselves better off overnight. "The fact that the new system is more generous than the old one went completely unnoticed," says Ralf Brauksiepe, a Christian Democrat member of parliament and labour market expert.

While the new flat-rate benefit may appear low at €345 a month, recipients can claim rent, heating and even furnishing costs from the state, which also foots pension and health insurance bills. Subsidies for interest payments on mortgages and for dependent children are also on offer. The cost to the public coffers of rent and heating subsidies alone trebled between 2004 and 2005 to €12.5bn.

While under the old system, no one with more than €2,000 in assets was eligible for social assistance, the threshold under Hartz IV was raised to €26,000 and every adult member of a recipient household is entitled to a car.

Many such provisions were not in the original draft but were added during the tense negotiations between the CDU-controlled upper house of parliament and the Social Democrat-led government that shaped the final bill in late 2004. "It was a classic case of German over-engineering," says a member of the original Hartz commission. "Once they had the draft, politicians began adding this or that sweetener and lost sight of the broader edifice. No wonder no one knew how high the eventual bill would be."

According to the federal labour agency, monthly benefits for a married couple with two children can reach €1,600. While welfare experts in parliament blame sluggish growth for the lack of jobs, many economists consider such generous benefits a powerful disincentive to work.
Even low-wage workers qualify, provided their earnings fall below a certain level. Nearly 1m Hartz IV recipients are legally employed and, as Ms Merkel herself admitted in a speech to the BDI industry federation last week, many deliberately work short hours in order to maintain their eligibility.

So dramatic has been the haemorrhage of state money that charitable organisations, including the Red Cross, recently disconcerted some of their own members by publishing a joint letter calling for benefit cuts "to guarantee the sustainability and stability of the welfare system".
While the generous payments make fraud attractive, it was a second flaw in the system that made it possible: the administrative chaos that reigned during the changeover at the agencies administering the scheme.

In a report published on Friday, the Hartz IV ombudsman's office, which oversees the reform, branded the "poorly organised" local agencies responsible for recipients on the ground as "bureaucratic monsters" in need of urgent repair. Again, the report blamed the politicians. Having failed to agree on whether the federal labour agency or municipal welfare offices should have ultimate control of the scheme, they had opted for hybrid solutions that had "blurred responsibilities". One finance ministry official in Berlin suspects that an endemic "bleeding-heart culture" at the federal labour agency and many welfare offices also accounts for some of the profligacy.

Given the combination of attractive benefits, generous means-testing rules and lax controls, Ms Fürst, whose team of two has recovered €300,000 in misappropriated benefits since November, estimates that 20 per cent of all Hartz IV claims are groundless.

She has a fund of horror stories. One manager who earned €3,800 a month was granted Hartz IV for more than a year. Another recipient sold all his furniture on Ebay, then re-equipped his house by claiming a generous subsidy for movers. As she drives through an affluent neighbourhood, she points to a villa surrounded by a vast garden. Its owner, she says, managed to pocket €9,000 in Hartz IV payments masquerading as a jobless tenant while in fact working as a freelance consultant.

Natasha, officially an unemployed doctor, has claimed Hartz IV while maintaining a website where she poses naked, promising to "fulfil all male fantasies with much creativity anddedication".

"Hiding assets is popular," says Mr Hofmeister. The team found recipients with villas in Lebanon, estates in Turkey, yachts, high-end kitchens and plasma screens. One was operating a hotel in Spain.

Whenever fraudsters are caught, they must repay the money and their files are passed to the local prosecutor. Yet, with overloaded courts prioritising more serious offences, in 18 months not a single person has been convicted. And in the absence of fines, abuse is essentially risk-free.

"Fraudsters should have to repay double the money illegally obtained," says Peter Walter, former Frankfurt police chief and the top CDU man on Offenbach's municipal council."That would cover the cost of our investigations and create a deterrent where there is none today."
Fraud, however, only partly explains the escalating costs. The dentist's wife who moves out of her home or the teenager who gets his own flat in order to claim benefits and rent subsidies, are acting perfectly legally. Germans, says Ms Fürst, are treating Hartz IV as a sporting challenge to the ingenious dodger. Mr Walter adds: "I hear complaints about the entitlement mentality and eroding morals, but [this] is the result of what we have done for decades, which is to gradually replace full employment by welfare support."

A "Hartz IV modification" bill, rushed through the lower house of parliament last month, will close the most gaping loopholes and beef up sanctions for the workshy. Yet it will save only €500m this year and €1.2bn in 2007. The CDU's powerful state premiers - whose budgets bear much of the Hartz IV burden - have secured the promise of a more ambitious reform this autumn after threatening to block the "modification" bill.

At the same time, though, some within the grand coalition are crossing party lines and banding together to resist radical change, anxious that if they are party to a crackdown, they could pay the price at the next election.

"The grand coalition should have moved earlier on this," says Leef Dierks, economist at Barclays Capital in Frankfurt. "The longer it waits, the less likely it is [to] muster the courage and the will."
Copyright The Financial Times Limited 2006

Merkel rejects plan for radical health reform (FT)

Angela Merkel has rejected a radical proposal by her coalition partner for a largely tax-financed health insurance system based on the Scandinavian model, people close to the German chancellor told the FT on Thursday.

Siemens and Nokia in €20bn network deal (FT)

Siemens and Nokia are to merge their network telecoms businesses in a joint venture that will create a leading player in the industry with a combined value of up to €20bn (£13.7bn).

Nokia said on Monday as many as 9,000 jobs could be axed in the next four years as a result of the deal between the German engineering conglomerate and the Finnish mobile giant. The merger announcement on Monday followed four months of discussions.

Olli-Pekka Kallasvuo, chief executive of Nokia, who will become chairman of the new venture to be called Nokia Siemens Networks, said: “The communications industry is converging, and a strong and independent Nokia Siemens Networks will be ideally positioned to help customers lower costs and grow revenue while managing the challenges of converging technology.”

The company had a combined €15.8bn in pro forma annual revenues for the calendar year 2005 and is expected to deliver cost savings of €1.5bn annually by 2010. Nokia said this would come primarily form the eliminating overlapping functions, better use of sales and marketing resources, overhead savings and sourcing benefits as well as more efficient research and development.

Nokia said a “substantial” portion of savings was expected to materialise in the first two years. “These changes are expected to result in a headcount adjustment over the next four years in the range of ten to fifteen per cent from the initial combined base of about 60,000.”

Simon Beresford-Wylie, currently executive vice president of networks at Nokia, will become chief executive of the newly formed company, which will have its headquarters in Helsinki and a regional headquarters in Munich, where three of the future five divisions of the new company will be based.

The joint venture follows hard on the heels of Alcatel's merger with Lucent and is a further step in the consolidation of the much-fragmented telecoms equipment industry.

Since the telecoms bubble burst, many industry players have struggled, and consolidation among their customers - the big telecoms carriers - has spurred them also to seek tie-ups. A Siemens-Nokia link could spark other deals, with Sweden's Ericsson and Motorola of the US seen as likely participants in consolidation.

The deal will lead to the separation of Siemens' enterprise networks business, which analysts believe could be sold later at a value of €3bn-€4bn. Nokia will become more focused on its mobile handsets business. Siemens will still have 11 other divisions ranging from power plants to light bulbs.

The deal is set to be warmly welcomed by Siemens investors, many of whom have been pressing hard for a solution to its troubled telecoms division, known as Com. Com is its largest division with €13bn in annual sales but has seen a dramatic decline in recent years, making a profit of just €27m in the second quarter, giving it a margin of 0.8 per cent, well below its target of 8-11 per cent by April.

Some analysts have suggested that Siemens had no coherent strategy for Com. DWS, Germany's largest fund manager and a top five Siemens shareholder called in January for Com to be spun off, suggesting it could add about €20 to Siemens shares, currently standing at €62.84.

The 50-50 joint venture marks the latest step in the restructuring undertaken by Klaus Kleinfeld, the young chief executive of Siemens. Mr Kleinfeld said on Monday: “This combination creates a leading industry player with immediate strength, excellent potential for growth and well-positioned to improve future profitability.”

In the job since January 2005, he has impressed investors, but Siemens' share price has not moved much since his arrival as investors awaited news on Com.

The deal is expected to be finalised by January 1 subject to regulatory approval.

Shares in Siemens were up 5.87 per cent to €66.24 in early trade, while Nokia shares rose 2.8 per cent to €16.11 in early trade.
Copyright The Financial Times Limited 2006

Germany finds its voice as a new generation waves the flag (FT)

Singing along to the national anthem of your country while waving its flag is not an unusual sight at football games. But the scenes in Dortmund last week among German fans were nothing short of extraordinary. The German team, playing against Poland, locked their arms around each other shoulders and to the accompaniment of tens of thousands of their compatriots belted the anthem out.

"I have never heard it sung even a quarter as loud before," says Uwe, a regular at Germany games and a car salesman. With the black, red and gold flag emblazoned on his cheek and another wrapped around him, he adds: "For the first time in my life I feel really proud to be German and the joy when we scored [in the 90th minute to win 1-0] was immense."

Germany is being engulfed by a wave of patriotism. From grannies with their faces painted to flags flying in the smallest of villages, pride is surging through a nation that has hitherto been uncertain how to celebrate itself.

Even now, though, the progress is accompanied by hand-wringing in some quarters and questions as to whether it can last.

Take the German anthem - its first verse "Deutschland über alles" is banned in Germany. The third verse that is now used has long remained obscure to many Germans, so much so that the official singer earlier this year at a German international got them wrong. For some, even this verse is too much. The GEW teachers' trade union has called for it to be replaced because it is a "Nazi-era relic".

Some MPs in Berlin argue that because of its past Germany must remain more modest about being patriotic. But there is a sense that things are changing with this World Cup.

Oliver Bierhoff, Germany's assistant coach, says: "I have never seen such scenes." Christoph Metzelder, a defender who is known as one of football's most intelligent voices, feels that Germany's new confident style of play - after years of turgid focus on defending - is in part a metaphor for the country. "My generation grew up in one of the most stable democracies in the world," he says.

"We won't forget the reminder of 12 years of the Nazi-era. But we can live unselfconsciously and carefree and we can also play football that way."

This sentence construction is normal when speaking to a German: they talk about the past before adding "but". Now even the "but" may slowly be starting to disappear.

Politicians are also showing their patriotic side. Chancellor Angela Merkel celebrated the goal against Poland by clenching her fists, while sitting next to the Polish president. Earlier she had said: "People are waving flags without having to justify themselves. Fifteen years ago, things were different. Our relation to our country has become something beautiful, but in a normal and not an arrogant way."

Norbert Lammert, head of the Bundestag, says: "It is the reconstruction of normality."
The explosion of joy in Germany has partly been one of relief - relief that Germany are playing well as a team after months of pessimism; relief that following hundreds of negative articles about matters such as stadium safety or ticketing, the World Cup is so far an unequivocal success; and relief that things finally feel different.

Olaf, a manager at a biotechnology company, says: "As a 42-year-old for the first time I am not embarrassed by the history. I remember in 1974 [when Germany hosted and won the World Cup] there was no singing, no sense of triumph. I remember in 1996, when we won the European Championship, seeing one person with a flag and feeling it was wrong."

One question is how long the euphoria will last and whether it is just connected with football or more deeply rooted. "It is hard to know if it is just caught up with the tournament," says Olaf. Uwe adds: "I'd like to think I would still want to wear the flag after this but I'm not sure whether it will feel embarrassing again."

For foreign visitors, perhaps most impressive is how Germans are throwing themselves into games between other countries. On a tram in Gelsenkirchen after Friday's match between Argentina and Serbia and Montenegro, passengers gradually began a singalong. Suddenly dozens of fans dressed in Argentina kit revealed their true colours - and their ambition to reach the final in Berlin. And suddenly in unison, everybody sang "Berlin, Berlin, wir fahren nach Berlin," ("Berlin, Berlin, we're going to Berlin") and then "Deutschland, Deutschland".
Copyright The Financial Times Limited 2006

Deutsche Börse in new move on Euronext (FT)

Deutsche Börse on Monday launched a fresh effort to woo Euronext away from a deal with the NYSE Group, making key concessions on operations that would give its Paris-based rival more power than the Germans had been prepared to concede.

The move involves no additional cash and was not presented to the Euronext board. John Thain, NYSE Group chief executive, dismissed the move, saying: “Based upon what I have seen so far, I don’t see any reason to change any element of our transaction.”

He also hinted that if Deutsche Börse improved the financial terms of its bid, the NYSE had more flexibility to respond, saying: “The NYSE has no debt and $650m in cash.”

Deutsche Börse’s concessions followed weeks of meetings with shareholders, bankers and politicians in Europe, and are aimed at persuading Euronext that its bid would not dismantle the organisation. On Monday, Kurt Viermetz, Deutsche Börse chairman, said it could raise the bid as a “final option”.

The move comes amid growing scepticism about the US tie-up among the French political establishment and is aimed more at public opinion than at winning over the Euronext board.

Advisers to both Euronext and Deutsche Börse privately agree that Euronext’s objections to a merger hinged on Deutsche Börse’s insistence on dismantling much of the organisation, and on controlling the new company.

The latest offer includes three significant concessions, one of which is integration of Deutsche Börse’s information technology business into Euronext’s.

Deutsche Börse also agreed that after a merger only German equities would be cleared through its Eurex subsidiary, leaving current Euronext clearing services in the hands of its LCH.Clearnet platform.

Thirdly, Deutsche Börse tried to address fears that the merger would get bogged down in scrutiny from European Union competition authorities by seeking advance clearance of the deal.
Euronext declined to comment last night but its advisers did not dismiss the approach out of hand. Under its agreement with the NYSE, Euronext may not solicit new offers, but an adviser said its board would be obliged to look at any better offer.

Rich Repetto, exchanges analyst at Sandler O’Neill, said the changes were “only a token of improvement” and that Deutsche Börse must improve the financial terms of its proposal “to be taken seriously”.

Others suggested the deal could hinge on NYSE’s share price, which has rebounded 10 per cent since last week but remains 9 per cent below its level when it announced the Euronext bid. This affects the mathematics of the deal. Deutsche Borse said that at the close on Friday, its bid was worth €65.98 per Euronext share, against €65.67 for the NYSE’s bid.

Additional reporting by Anuj Gangahar in New York

Copyright The Financial Times Limited 2006

Germany's truce with feminism (FT)

Until recently, new welfare benefits were taken as permanent advances for civilisation. Whether they involved earlier retirementages, more generous health plans or rights to education, they were what the French called acquis - promises that the next generation would be spared a problem that had bedevilled the last. But when the German government approved a new programme for Elterngeld (parents' money) on Wednesday, the reaction was muted.

Like all welfare innovations nowadays, Elterngeld addresses not an age-old problem but a new one, which has arguably been created by the welfare state itself. The new problem is that German women are having very few babies: 1.34 per woman, to be precise. Thanks to a number of frightening recent bestsellers, Germans have become aware that this national barrenness means the certain destruction of their welfare state over the next decades and the possible collapse of their society.

Ursula von der Leyen, the philoprogenitive family minister, hopes that Elterngeld will once again make childbearing look like a good deal. Starting next year,a mother who takes time off to have a baby will get two-thirds of her previous take-home pay - to a maximum benefit of €1,800 (£1,200) a month for up to 12 months - 14 months if both parents stop work for a bit.
The unemployed get €300 a month. It is a €4bn programme. So why is the public so lukewarm about it?

The leftwing objection to Elterngeld is that it is less egalitarian than the system it is replacing. Kindergeld (or child money), as the old system is called, would cover children up to age 27 in some cases, and other side-benefits could be tapped along with it. Jobless new mothers, who could collect €300 a month for two years under the present system, will only collect for half as long in future. The government made some adjustments to the new plan last week that soften the blow for low earners. But of the 620,000 new families covered annually by the measure, 250,000 will be worse off. Some rank-and-file Christian Democrats (CDU) are upset because Kindergeld was one of their party's proudest achievements. Now their own CDU chancellor, Angela Merkel, has abandoned it for Elterngeld, a more capitalistic plan that was developed by their Social Democratic (SPD) coalition partners and rivals. (Clearly, politicians' attitude towards the welfare state depends more on their era than on their party: Clinton, Blair and Schröder have proved less socialist than Eisenhower, Macmillan and Adenauer.)

But there is also a rightwing objection. It is that, nice though family formation is, Elterngeld is going to backfire. The child-averse psychology that the law seeks to short-circuit is a complex one. Poorer people may forgo children because the cost is too high. But people with good jobs are reluctant to have children, too, because the opportunity cost of stopping work is too high. In theory, Elterngeld is tailored to address this problem because the value of its benefit rises along with a would-be mother's earning power. But there are instances where its incentives may work to delay childbearing. Consider a 28-year-old married woman in law school or medical school. If she has the baby she wants, she will collect only the €300-a-month minimum, while the family will likely still be too poor to have the father stay home to "earn" the two supplemental months. Betterto hold off for a few more years. Then, rather than get the €300 benefit for 12 months (€3,600), the family can get the €1,800 benefit for 14 (€25,200).

And what of the women who do not ever want to enter the workplace? In a grumpily brilliant attack on Elterngeld, Stefan Dietrich of the Frankfurter Allgemeine Zeitung coined the term Nurhausfrau ("onlyahousewife") to describe the contempt that the paltry €300 payout signals for those women who stay at home and raise children. Mr Dietrich has a point. Work in the household - whether childcare or cleaning - is the last socially useful work that is not given a dollar value. The moment it is, then parents will be seen as woefully undercompensated for what they do.

But that is a different argument. The present German family-policy debate does not resemble the ones that raged until recently in almost all western countries, with two ideals of motherhood battling it out. The needs of working mothers (for more daycare) used to be pitted against those of non-working mothers (usually for tax relief). Elterngeld aims neither to ease the burden on the working mother, nor to lift the stigma on the stay-at-home one. It aims to get women who would not otherwise have children to have them. Like most emergency measures, Elterngeld takes the situation as it exists, not as it ought to be. That is why it declares a truce with feminism's ideal of women in the workplace.

That truce may be temporary. There are deeper conflicts that the German policy papers over. Through the feminist decades, women's wishes for society have been in perfect harmony with businessmen's wishes for the economy. Everyone seemed to benefit from women's eagerness to take their rightful spots in the workplace. It meant more manpower, lower labour costs and more investment in education. You could have your cake and eat it. But now an important western country has shown itself willing to pay billions to steer women out of the workplace and into childbearing, if only for a short time. We are clearly in a new era, marked by a recognition that building the society we want is going to cost us part of our standard of living - or that our standard of living can only be maintained at the cost of damage to society.

Elterngeld reflects this thinking more clearly than any government programme yet. It is a new set of tradeoffs, not a new set of benefits. We will see a lot more government programmes like it.
The writer is a senior editor at The Weekly Standard
Copyright The Financial Times Limited 2006

German truce with feminism (FT)

Christopher Caldwell: German truce with feminism
By: By Christopher Caldwell, FT.com site
Published: Jun 16, 2006

Until recently, new welfare benefits were taken as permanent advances for civilisation. Whether they involved earlier retirement
ages, more generous health plans or rights to education, they were what the French called acquis – promises that
the next generation would be spared a problem that had bedevilled the last. But when the German government approved a new programme for Elterngeld (parents' money) on Wednesday, the reaction was muted.

Like all welfare innovations nowadays, Elterngeld addresses not an age-old problem but a new one, which has arguably been created by the welfare state itself. The new problem is that German women are having very few babies: 1.34 per woman, to be precise. Thanks to a number of frightening recent bestsellers, Germans have become aware that this national barrenness means the certain destruction of their welfare state over the next decades and the possible collapse of their society.

Ursula von der Leyen, the philoprogenitive family minister, hopes that Elterngeld will once again make childbearing look like a good deal. Starting next year, a mother who takes time off to have a baby will get two-thirds of her previous take-home pay – to a maximum benefit of €1,800 ($2,300) a month for up to 12 months – 14 months if both parents stop work for a bit. The unemployed get €300 a month. It is a €4bn programme. So why is the public so lukewarm about it?

The leftwing objection to Elterngeld is that it is less egalitarian than the system it is replacing. Kindergeld (or child money), as the old system is called, would cover children up to age 27 in some cases, and other side-benefits could be tapped along with it. Jobless new mothers, who could collect €300 a month for two years under the present system, will only collect for half as long in future. The government made some adjustments to the new plan last week that soften the blow for low earners. But of the 620,000 new families covered annually by the measure, 250,000 will be worse off. Some rank-and-file Christian Democrats (CDU) are upset because Kindergeld was one of their party's proudest achievements. Now their own CDU chancellor, Angela Merkel, has abandoned it for Elterngeld, a more capitalistic plan that was developed by their Social Democratic (SPD) coalition partners and rivals. (Clearly, politicians' attitude towards the welfare state depends more on their era than on their party: Clinton, Blair and Schröder have proved less socialist than Eisenhower, Macmillan and Adenauer.)

But there is also a rightwing objection. It is that, nice though family formation is, Elterngeld is going to backfire. The child-averse psychology that the law seeks to short-circuit is a complex one. Poorer people may forgo children because the cost is too high. But people with good jobs are reluctant to have children, too, because the opportunity cost of stopping work is too high. In theory, Elterngeld is tailored to address this problem because the value of its benefit rises along with a would-be mother's earning power. But there are instances where its incentives may work to delay childbearing. Consider a 28-year-old married woman in law school or medical school. If she has the baby she wants, she will collect only the €300-a-month minimum, while the family will likely still be too poor to have the father stay home to "earn" the two supplemental months. Better
to hold off for a few more
years. Then, rather than get
the €300 benefit for 12 months (€3,600), the family can get the €1,800 benefit for 14 (€25,200).

And what of the women who do not ever want to enter the workplace? In a grumpily brilliant attack on Elterngeld, Stefan Dietrich of the Frankfurter Allgemeine Zeitung coined the term Nurhausfrau ("onlyahousewife") to describe the contempt that the paltry €300 payout signals for those women who stay at home and raise children. Mr Dietrich has a point. Work in the household – whether childcare or cleaning – is the last socially useful work that is not given a dollar value. The moment it is, then parents will be seen as woefully undercompensated for what
they do.

But that is a different argument. The present German family-policy debate does not resemble the ones that raged until recently in almost all western countries, with two ideals of motherhood battling it out. The needs of working mothers (for more daycare) used to be pitted against those of non-working mothers (usually for tax relief). Elterngeld aims neither to ease the burden on the working mother, nor to lift the stigma on the stay-at-home one. It aims to get women who would not otherwise have children to have them. Like most emergency measures, Elterngeld takes the situation as it exists, not as it ought to be. That is why it declares a truce with feminism's ideal of women in the workplace.

That truce may be temporary. There are deeper conflicts that the German policy papers over. Through the feminist decades, women's wishes for society have been in perfect harmony with businessmen's wishes for the economy. Everyone seemed to benefit from women's eagerness to take their rightful spots in the workplace. It meant more manpower, lower labour costs and more investment in education. You could have
your cake and eat it. But
now an important western country has shown itself willing to pay billions to steer women
out of the workplace and into childbearing, if only for a short time. We are clearly in a new era, marked by a recognition that building the society we want is going to cost us part of our standard of living – or
that our standard of living
can only be maintained at the cost of damage to society.

Elterngeld reflects this thinking more clearly than any government programme yet.
It is a new set of tradeoffs, not a new set of benefits. We will see a lot more government programmes like it.


The writer is a senior editor at The Weekly Standard


Copyright © Financial Times group

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Germany poised to slash taxes on business by a quarter (FT)

Peer Steinbrück, the German finance minister, has finalised the outlines of a corporate tax reform aimed at slashing levies on company profits by almost a quarter from 2008.

The changes would bring the average nominal tax burden on corporations, now the third highest in the developed world after the US and Japan, from 39 per cent down to 30 per cent, below the rates in most of Germany's neighbours.

The initiative, details of which were leaked to the news media, could help restore business confidence in the "grand coalition" of Angela Merkel, chancellor. Her government of Christian Democrats and Social Democrats has come under fire for dragging its feet on structural reforms and for its planned 3 percentage point rise in value-added tax next January.

Tax cuts, however, could meet with disapproval from those European Union neighbours battling large budget deficits and fearing such cuts could fuel tax competition in the region.

"We are not provoking tax competition but it is here and we must react," a government official said. "What is objectionable is the kind of ruinous competition that leads to dramatic tax revenue falls - which will not be the case here."

Germany already faces criticism for the restrictive wage settlements of the past five years.

Critics have likened the deals to a "beggar-thy-neighbour" attempt at raising the competitiveness of German companies at the expense of domestic demand and growth.

Mr Steinbrück, who presented his blueprint to Ms Merkel yesterday, has yet to release information about his plan. The reform could be heavily changed during Germany's notoriously protracted law-making process, which could last until next year.

Officials yesterday confirmed that the minister proposed to cut the centrally set Körperschaftsteuer - corporate taxation - from 25 per cent to 12.5-16 per cent, saving companies up to €7bn ($4.8bn) in the first year.

The Gewerbesteuer - a communal tax - would be left untouched but its basis would be extended, allowing the state to recoup most of the lost revenues from the corporate tax cut in the medium term.

These two measures would result in an average consolidated rate of about 30 per cent, which would also apply to reinvested profits bynon-incorporated companies currently subject to income tax.

Mr Steinbrück's plan also envisages a new flat-rate capital gains tax at source.

While taxpayers today must declare capital gains as part of their taxable income, banks would in the future levy a 25-30 per cent tax on all gains from financial transactions.

Cloudy outlook for the German economy (FT)

The outlook for Germany's slowly recovering economy has clouded, according to a monthly survey of financial analysts released yesterday.

The ZEW indicator fell by 12.2 points to 37.8 - the fifth fall in a row since hitting a high of 71 in January - and in contrast to the upbeat business sentiment surveys and positive macroeconomic data released in recent weeks.

The ZEW institute listed poor stock market performance, the appreciation of the euro, higher oil prices, and the European Central Bank's policy of raising interest rates as the main reasons behind the pessimism about Germany's heavily export-dependent economy.

Analysts had moved be-yond the expected short-term rise in retail sales in advance of a planned three-point increase in value added tax next January and were now focusing on the slowdown in demand that the VAT rise could cause next year, it said.

But several of the experts who participate in the survey of 330 financial analysts said the results should be put into perspective, pointing out the high volatility of the poll.

Erik Sonntag, of ING Bank, said he remained positive about Germany's gross domestic product in the short term and continued to forecast accelerating growth in the second quarter.

The Ifo sentiment index, which polls more than 7,000 companies, and recent Purchasing Managers surveys are close to their record highs. Export and industrial production statistics show Germany's manufacturers have so far weathered the euro's appreciation, while robust retail sales in April hinted at a rebound in consumer spending.

Ihr Verlierer! (Die Zeit)

Die Männer sind in Not: In der Schule, auf dem Arbeitsmarkt und im Familienleben.

Eine Schadensbilanz Von Susanne Gaschke

Schon ohne dass man die großen Worte »Krise« oder »Versagen« bemühen muss, können Männer einem auf die Nerven gehen: wenn sie die Frau am Nebentisch mit Stentorstimme über Banalitäten belehren; wenn sie im ICE irgendwelchen Business-Unfug in ihr Handy brüllen; wenn sie wieder einmal ihre Gattin wegen einer Jüngeren verlassen. Doch das sind mehr oder minder subjektive Ärgernisse. Den Anlass, tatsächlich von einer Krise der Männer zu sprechen, liefern harte, objektive Fakten: die massiven Erziehungs- und Bildungsprobleme des männlichen Nachwuchses; die zunehmende, praktisch ausschließlich männliche Gewaltkriminalität; die für Männer besonders ungünstige Entwicklung auf dem Arbeitsmarkt; ihre Unfähigkeit, sich auf Familie und Vaterschaft einzulassen; schließlich der Mangel an kulturellen Vorbildern für einen zukunftsfähigen Mann neuen Typs.

Vor einer Sichtung dieser fünf Probleme ist allerdings eine Einschränkung angezeigt: Die deutschen Männer geraten auf hohem Niveau unter Druck. Sie stehen noch nicht unmittelbar vor dem Untergang. Sie sind nach wie vor gut vertreten in der Politik (auch wenn dort jetzt Angela Merkel ertragen werden muss) und in den Chefredaktionen, sie dominieren den Wissenschaftsbetrieb und die Vorstandsetagen der Wirtschaft und werden im Durchschnitt besser bezahlt als vergleichbar ausgebildete Frauen. Es geht also zum einen um die objektiven Krisenmerkmale, aber mindestens ebenso um ein Phänomen, das der Berliner Soziologe und Männerforscher Walter Hollstein »gefühlten Machtverlust« nennt. Wir sprechen über eine Frage des Trends. Es ist ein bisschen so wie bei den an sich absurden Vergleichen des Wirtschaftsriesen Deutschland mit Winzigländern wie Estland: Deren dynamische Wachstumsraten bedeuten wenig mehr, als dass dort noch alle Straßen zu pflastern, alle Außentoiletten nach innen zu verlegen und alle Kohlefeuerungen herauszureißen sind – und doch machen uns die Winzlinge in unserem Exportweltmeistertum Angst. Die Männer sind im Augenblick Deutschland, wenn man so will. Die Frauen sind Estland.

Erstes Alarmsignal: Der männliche Nachwuchs ist von der Rolle. Erwachsene sind zutiefst verunsichert darüber, ob man überhaupt Kinder haben und, wenn ja, wie man sie erziehen sollte. Diese Verwirrung trifft Jungen härter als Mädchen. Für Mädchen gibt es das traditionelle Rollenangebot mit einer gesellschaftlich akzeptierten Erweiterungsmöglichkeit um (fast) alle männlichen Optionen: Klein Sabine kann mit drei Jahren Mamas Lippenstift benutzen, mit 14 Ballettunterricht nehmen oder Fußball spielen und mit 18 Jahren Kindergärtnerin werden oder zur Bundeswehr gehen. Fußball und Bundeswehr würden von der Mehrzahl ihrer Freunde und Verwandten als Bereicherung ihres Lebens betrachtet werden. Für Klein Torsten hingegen stehen Lippenstift, Ballett und Arbeit im Kindergarten nicht wirklich auf der Zugewinnliste. Unterdessen gerät die originär männliche Identität immer mehr ins Wanken: Bewusst jedenfalls wollen nur die wenigsten Eltern einen fiesen Macho heranziehen. Während Mädchen also nahezu zwei komplette Rollenoptionen für sich vorfinden, steht Jungen allenfalls eine zur Verfügung.

Diese Problemlage spitzt sich noch einmal zu für die wachsende Zahl von Jungen, die ohne Väter, ja überhaupt ohne männliche Vorbilder aufwachsen. Im Kindergarten stoßen die vaterlosen Jungen auf 95 Prozent Erzieherinnen und fünf Prozent Erzieher. In der Grundschule ist nur jede vierte Lehrperson männlich. Die alte feministische Hoffnung, dass eine rein weibliche Erziehung sanftere, einfühlsamere Männer hervorbringen müsste, hat sich nicht erfüllt. Und es ist ja auch nicht so, dass alle Mütter, Erzieherinnen und Lehrerinnen sich eindeutig verhielten: Einerseits werden Jungen am Ausleben normaler, vollkommen unschädlicher Aggressionen in Ringkämpfen gehindert, weil weibliche Betreuungspersonen den harmonischeren Barbie-Spielstil der Mädchen zum Ordnungsmaßstab auf dem Schulhof erheben. Andererseits werden ihnen, auch, gerade von Frauen die Botschaften der »alten« Männlichkeit souffliert: Ein Indianer kennt keinen Schmerz! Ein Junge weint nicht! Es gibt unglaublich viel verantwortungslos-stolzes Mutti-Gerede über den »kleinen Mann«, der sich unter diesem ermutigenden Einfluss munter zum Familien-Tyrannen entwickelt. Bei vielen Eltern findet man zudem einen kruden Bequemlichkeits-Biologismus: Wenn der Knabe nicht lesen will, ist das gewiss genetisch bedingt; wenn er stundenlang am Computer ballert, drückt sich darin irgendwie sein natürliches Technikverständnis aus.

Jungen stottern viermal so häufig wie ihre Schwestern

Es gibt eine Vielzahl von Hinweisen darauf, dass diese zwiespältige Erziehung und die geschlechtsspezifische Medien-Fehlnutzung dem männlichen Nachwuchs nicht gut tun: Jungen sind viel häufiger verhaltensauffällig als Mädchen, stottern viermal so oft wie ihre Schwestern und leiden, unterschiedlichen Schätzungen zufolge, drei- bis siebenmal so häufig wie die Mädchen am Aufmerksamkeits-Defizit-Syndrom (ADS). Das alles macht die Jungen zu schwierigen Kindergarten- und Schulkindern. Dementsprechend schlechter fallen auch ihre Leistungen aus.

Zweites Alarmsignal: Kriminalität ist männlich. Die Gewaltkriminalität, die Delikte wie gefährliche Körperverletzung, Mord und Totschlag, Geiselnahme und Vergewaltigung umfasst, hat sich seit Mitte der achtziger Jahre verdoppelt – und sie ist fest in männlicher Hand. Männer sind siebenmal so häufig des Mordes und zwölfmal so häufig des Raubmordes verdächtig wie Frauen, werden fünfmal öfter der Körperverletzung und achtmal öfter der Sachbeschädigung bezichtigt und begehen den Großteil aller Verkehrsdelikte.

TEIL 2
Der kriminelle Trend ist auch beim Nachwuchs ungebrochen: Zwar ist die Jugendkriminalität insgesamt rückläufig, aber die (männlichen) Gewaltdelikte wie Körperverletzung haben in den vergangenen Jahren deutlich zugenommen. Männerforscher Hollstein hat ausgerechnet, dass das Ausagieren »fehlgeleiteter Männlichkeit« pro Jahr Folgekosten von 15 Milliarden Euro verursacht – ein Drittel des Hartz-IV-Budgets und ein interessantes Einsparpotenzial. Die männliche Aggression richtet sich direkt oder indirekt vor allem gegen das eigene Geschlecht: Männer verletzen nicht nur andere Männer, sondern begehen auch dreimal so häufig Selbstmord wie Frauen, sie sind viel häufiger obdachlos, drogen- oder alkoholabhängig und sterben im Schnitt sechs Jahre früher – offenbar infolge einer Mischung aus Veranlagung und einem Hang zu ungesunder Lebensweise.

Drittes Alarmsignal: Die Veränderungen des Arbeitsmarktes bedrohen vor allem die Männer. Der Arbeitsmarkt ist für viele Menschen in Deutschland ein unerfreuliches Thema: für Berufsanfänger, die zu endlosen unbezahlten Praktika genötigt werden; für leistungsstarke 60-Jährige, die man aus dem Job verdrängt; für Eltern mit Kindern, die den Flexibilitätserwartungen ihrer Chefs nur schwer entsprechen können; für Geringqualifizierte. Vor allem aber sind die Strukturveränderungen des Arbeitsmarktes ein Problem für Männer. Der Wandel von der Industrie- zur Dienstleistungsgesellschaft vernichtet vor allem einfache Arbeitsplätze und solche, für die man Körperkraft aufwenden muss.

Poland and Germany find unity in rivalry (FT)

The most appealing football games to fans are often those unloved by security officials. So it is with Germany against Poland, tonight in Dortmund.

The difficult history between the two countries gives the match an extra edge. Indeed, the notoriety of Polish hooligans has meant this has long been one of the top priorities among police. Signs from Neo-Nazis have made the problem explicit: "We defeated Poland in 1939 in 28 days. Today it will take 90 minutes," one says.

But talk to fans and political analysts and a much different picture emerges - one of German-Polish rivalry certainly, but where the old historical worries are no longer relevant. Far more important is the football - and for Poland, who lost in their first game with a terrible performance against Ecuador, the game "is nothing less than a final", says midfielder Jacek Krzynowek.

On the tram back from Friday's 2-0 defeat to Ecuador, Polish fans were despondent. "We played like idiots - I cannot explain it," said Michal from just outside Warsaw. But on Germany as a country he and his tearful comrades were unanimous: "All that was 60 years ago - there is animosity today, but on the football pitch only."

In Poland, the match carries none of the wartime echoes that are so common in the British press whenever England plays Germany. "There is no such attitude of linking the war to the game," says Marek Sarjusz-Wolski, editor of Unia & Polska, a magazine on European issues. "I see no danger, even if the Poles lose, and they will unfortunately lose, that the game will have any impact on relations."

Hundreds of thousands of Poles live and work in Germany, and many German companies, such as MAN, the truckmaker, have invested in Poland. According to a recent poll, 80 per cent of Poles believe that reconciliation with Germany is possible, while only 69 per cent thought the same was feasible with Russia. In 1990, half of Poles thought it would be impossible to reconcile with Germany, which is now judged the third most friendly country to Poland, behind the US and the UK, but ahead of France.

Politically, there are some tensions - notably over a gas pipeline and the issue of whether Germans expelled from Poland after the war should gain compensation - but such concerns will not matter to the tens of thousands of red-and-white clad fans expected in Dortmund. "That was why the World Cup was invented, so that our warriors meet on the football pitch and not on the battlefield," says Mr Sarjusz-Wolski.

On the pitch, the odds seem stacked in Germany's favour. Poland played against Ecuador without any inspiration and the threat is that they could buckle versus a German team that loves to rampage forward.

Much of the discussion in Germany before the match has centred on "Our Calf", as the German press calls it (when Josef Ratzinger was elected Pope, the Bildtabloid ran a headline "We are Pope"). Just as Wayne Rooney's injury has preoccupied the English, a much less serious (calf) injury to captain Michael Ballack has prompted a bout of national hand-wringing and raised questions about unity in the German camp.

Ballack is Germany's one clear star. His form has been variable this year but he remains capable of turning a game.

What has really been convulsing Germany, though, is the suggestion that Ballack and coach Jürgen Klinsmann are not seeing eye to eye. The usually reticent Ballack first criticised Klinsmann's tactics as overly favouring attack and being too naïve - a charge that finds much favour among Germans more used to seeing their team grind out 1-0 victories rather than 4-2 thrillers. Then, shortly before Friday's opening victory against Costa Rica, Ballack declared himself fit to play to Bild - a long-time hater of Klinsmann - despite the coach having already ruled him out.

Klinsmann prevailed but worries persist that captain and coach are pulling in different directions. Germany's three previous titles have all been achieved with strong captain-manager relationships from Sepp Herberger and Fritz Walter in 1954, to Helmut Schön and Franz Beckenbauer in 1970 and Beckenbauer and Lotthar Matthäus in 1990.

The Poles would probably love to have such problems. Krzynowek says theymust avoid beating themselves up too much over the Ecuador display.

"We must not talk ourselves down," he said. "In qualification [where they nearly secured top spot of their group ahead of England] we were strong enough. We just have toforget Ecuador and put everything into this match."

The German-Polish rivalry is perhaps best summed up by the fact that the home side's two starting centre-forwards were both born in Poland. Miroslav Klose and Lukas Podolski - who says the game "will be the most emotional of my life" - both moved to Germany in their childhood.

Michal, the Polish fan, says: "They should be playing for us - it would just be our luck that one of them scores against us to sendus home."

Schule - sueddeutsche.de

Schule - sueddeutsche.de

Nach der Grundschule
Zum Versager abgestempelt

Eltern wollen nur das Beste für ihren Nachwuchs: das Abitur. Doch der wachsende Druck in den ersten Schuljahren macht Kinder krank.

Expect Integration Issues to Challenge NYSE/Euronext Merger (Gartner)

With the integration of Archipelago incomplete, the much greater challenge of realizing synergies for NYSE Euronext presents difficulties. Clients should reassess alternatives in case this merger doesn't work.

Germany: On the right day with the right support ... (FT)

Germany are the World Cup’s perennial over-achievers. They won their first (of three) in 1954 in Berne, with a team of petrol station managers and cleaning proprietors against Ferenc Puskas and his magnificent Magyars, in one of the competition’s biggest-ever shocks.

In the last World Cup, they went to Japan and South Korea with a side containing little talent and still made it to the final.

This time their squad is arguably even weaker. However, they have the advantage of playing at home. This has nurtured a peculiar attitude among German fans, who regard their team with a mixture of wild optimism and extreme condescension.

This uncharacteristically fickle stance has extended to coach Jürgen Klinsmann. The former international striker has dragged the team into the modern era with new training drills, adventurous selections and an aggressive style of play, yet has been forced to endure much criticism – including resignation calls – for his side’s indifferent results and his habit of jetting in for games from his California home.

The calls for him to go reached a particularly high pitch earlier this year when Germany lost 4-1 to old rivals Italy. Indeed, as armchair pundits like to point out, the Mannschaft’s last victory against a leading football nation was more than five years ago against England – who took emphatic revenge a year later, handing out a 5-1 drubbing in Munich’s Olympic stadium.

The biggest worries in the run-up to the opening game – what should be a relatively gentle loosener against Costa Rica – concern the home team’s defence. This is young and without much experience in big competitions – or at least it was until Klinsmann recalled veteran Jens Nowotny in what looked like a desperate act. Per Mertesacker, Philipp Lamm and Arne Friedrich all ooze insecurity, while Nowotny will struggle against a striker with even the slightest turn of speed.

Klinsmann even contrived to make a hash of what should have been a strength: the goalkeeper’s position. Oliver Kahn, Bayern Munich’s fiery number one, almost single-handedly guided Germany to the 2002 final. But Klinsmann felt he had become complacent through a lack of competition and so, about 18 months ago, set in place a rotation system, with Kahn playing one game and Jens Lehmann, his arch-rival from Arsenal, the next.

This created a poisonous atmosphere. Eventually, Lehmann got the nod only for fans to plunge again into an existential quandary after he was sent off in last month’s Champions League final against Barcelona.

Klinsmann also lacks a top-class striker, having only Werder Bremen’s solid Miroslav Klose, whose haul of five goals in the 2002 World Cup was inflated by a hat-trick against a dire Saudi Arabia, and the young but immature talent of Cologne’s Lukas Podolski. Like England, Germany have included an uncapped but pacy youngster – Borussia Dortmund winger David Odonkor.

The midfield has a bit more zip – at least on paper: Chelsea may have rolled out the red carpet for Michael Ballack, but much of his play this year for Bayern Munich has been below his best and Germany must hope he regains form fast. Torsten Frings and Bernd Schneider are both solid and dependable, while Bastian Schweinsteiger can supply a dash of the unexpected.

So far so uninspiring. And yet, not even this German team can be written off. On the right day, with vocal home support, they are capable of raising their game.

In last summer’s Confederations Cup, Germany played Brazil in Nüremberg. They may have lost 3-2 but they played brilliantly. Perhaps Klinsmann’s men may yet join Germany’s over-achievers.

East German state leader denies no-go areas exist (FT)

In spite of a recent surge in racist attacks in eastern Germany the region does not have no-go areas that foreigners should avoid for fear of neo-Nazis, a senior regional politician claimed yesterday.

Matthias Platzeck, state premier of Brandenburg, the east German state that surrounds Berlin, said black people could live safely in the state, but complained it had been "stigmatised" in the media by suggestions that foreigners should avoid the region.

"In Potsdam [the state capital], for instance, people of all skin colours can walk the streets perfectly safely; the city is more secure than many others around the world" he told the Financial Times, adding that no-go areas "do not exist".

His comments are likely to fuel a heated debate on responses to recent assaults. In April an Ethiopian man was mugged in Potsdam by two men with far-right links, and a Turkish-born politician was last month attacked in east Berlin.

Then neo-Nazi supporters marked a late-May public holiday by attacking a foreigners' festival in Weimar, south-west of Berlin, and by mugging several black people in the capital.

Concern about racist attacks has increased ahead of the football World Cup which starts in Germany next week and is expected to attract significant numbers of foreign visitors.

In rare comments from a senior legal figure, Monika Harms, Germany's newly appointed chief federal prosecutor, told a German newspaper yesterday that "far-right extremism is not just a problem for east [Germany]".

Her comments echoed concerns of many politicians and anti-racist groups that the problem was a national concern, and that warning foreigners to avoid certain areas handed a victory to far-right groups.

The controversy on no-go areas spiralled last month when Uwe-Karsten Heye, a senior politician from Mr Platzeck's Social Democratic party, warned black people not to visit parts of Brandenburg as they "might not come out alive".

Mr Platzeck said the reporting of Mr Heye's comments "had stigmatised Brandenburg in a way that really hurt us". The state has many anti-racist projects, he said. "These project workers now ask me: 'has our work over the last 10 years been in vain?'" he added.

He admitted that, compared with other states, Brandenburg had a "high level" of far-right violence. The risk of such an attack in the state is almost 10 times higher than in the western state of Hesse, according to official statistics.

He said that to promote anti-racism, teachers needed better training and nursery age children should be encouraged to mix with black people.

Bertelsmann finds possible buyers for music publisher (FT)

Bertelsmann is holding first talks with selected potential bidders for its BMG Music Publishing unit, FT Deutschland, the FT’s sister paper has learned.

Europe’s largest media company had announced the intention to sell its music publishing division last week.

Among those interested are Charles Koppelmann, the long-standing music manager, and the former Warner Music chief executive Roger Ames, who is currently advising EMI, the UK music company.

The sale of BMG is part of Bertelsmann’s effort to raise the €4.5bn ($5.7bn) it needs to buy back the stake held by Groupe Bruxelles Lambert. The buy-back, planned for the start of July, will give back full control to the founding Mohn dynasty, which owns 75 per cent of the TV, books and music company.

GBL acquired a 25 per cent stake in the German media group five years ago when it gave Bertelsmann control of TV company RTL. It was looking to make use of its right to float the stake after the end of May, but the Mohn family wanted to stop a listing.

Bertelsmann’s speed in starting talks signals the group’s determination to pay back the necessary loan as early as possible. According to the group, which is expecting to raise more than €1bn through the sale of BMG, the debt resulting from the buy-back should already be “diminished substantially” during the next 12 to 18 months.

Last year, BMG’s net publisher share – turnover minus the licences that are paid to artists and authors – was above €170m, according to industry insiders, while the unit’s earnings before interest and tax were €80m. Unlike the music business, music publishing businesses benefit from steady incomes and profit margins of more than 20 per cent.

There is no shortage of interest in BMG, as the move comes in a period of general turmoil in the music publishing industry. Besides industry figures and rival music groups, such as Universal Music Group, financial investors, such as Europe-based Permira and US-based Elevation Partners, have voiced their interest.

There is speculation another big music publisher could go up for sale in the future, which could be built into a dominant player in the publishing business.

Speculation has been fired by the ongoing merger talks between the two music companies EMI and Warner.

AMD investing $2.5bn in German chip factory (FT)

Advanced Micro Devices said on Monday it was investing $2.5bn in a German chip factory in a move to expand its capacity and grab more market share from its rival Intel.

AMD, the number two maker of PC microprocessors, said it would implement three new projects at its existing Dresden facility over the next three years.

This would give it additional production capabilities to produce circular wafers that are 12 inches or 300mm in diameter. The larger diameter wafer yields more than twice as many processor chips and greater efficiencies than its 200mm predecessor.

Hector Ruiz, chief executive, said: “As global demand continues to rise for AMD products, we are scaling our manufacturing capacity intelligently to meet our customers’ growing needs.

“To achieve this, we are pursuing an aggressive path to invest in and expand our top-rated manufacturing capabilities in Dresden.”

AMD has set itself a target of winning 30 per cent of the market for the dominant “x86” family of microprocessors over the next few years. Traditionally, Intel has held around 80 per cent of this market but its lead has been slipping as it has suffered chipset shortages and AMD’s chips have offered better performance.

Analysts have said that one of the reasons Dell, the biggest PC customer for chips, has not bought from AMD to date is concern over its manufacturing capacity and ability to deliver.
However, Dell announced earlier this month it would use AMD chips for the first time, in a small server segment of the market. AMD may feel its announcement of new capacity could broaden the relationship.

AMD has lagged Intel in converting to 300mm wafers and in moving from 90 nanometres or billionths of a metre to 65 nanometre processes.

The measurement refers to the reducing width of circuitry on chips, allowing more transistors to be fitted on the die.

The Silicon Valley-based company did not say how it would fund the Dresden expansion.

The dutiful game (FT)

Adolf Hitler went to see what was probably his first football match during the Berlin Olympics of 1936. He had meant to attend the rowing at Gronau, but Albert Forster, the Nazi chief of Danzig, had persuaded him to come and watch Germany thrash little Norway instead. Joseph Goebbels, who watched with Hitler, would write: "The Fuhrer is very excited, I can barely contain myself. A real bath of nerves. The crowd rages. A battle like never before. The game as mass suggestion."

But to Forster's mortification, Germany lost 2-0. "Not fully deserved," Goebbels noted. Hitler never saw a football match again. Only after his era did the German football team become an emblem of the German nation. The current team is a national joke, and yet as the country prepares to host this summer's World Cup, football still helps define the idea of Germany.

Football took off in Germany thanks to the first world war. The troops on the western front played for relaxation and after the armistice they took the game home with them. But the German football team long remained poor. This continued even when Sepp Herberger became Reichstrainer of the national team in 1937, with a swastika on his tracksuit. He would keep the job for 27 years and practically invent German football, yet the 1938 World Cup in France, his first in charge, was a disaster. "Sixty million Germans will play in Paris!" the Nazi newspaper Volkischer Beobachter had trumpeted. After the Germans were swiftly knocked out by Switzerland, Zurich Sport teased: "So 60 million Germans were playing. We only needed 11 footballers."

It summed up the bad luck the Nazis had with football. They never got used to the game's uncertainty. After another defeat to Switzerland on Hitler's birthday in 1941, Goebbels wrote: "Definitely no sporting exchanges when the result is the least bit unpredictable."

Yet during the war the German team continued playing internationals. Albert Sing, who played in Germany's last eight wartime matches between April and November 1942, remembers the pressure. It wasn't so much that the Nazis demanded victory, Sing told me when I visited him in his retirement village in Switzerland, as the fact that the players knew what would happen if they played badly and were dropped from the squad. "You'd go to the front," he laughed. And anyone sent to the Eastern front in 1942 would very probably die.

In the end the players were sent to the front after beating Slovakia 5-2. This was partly to pacify the mothers who had lost their sons and were asking why others were swanning about playing football. "A month after the dissolution of the team two players were dead, Urban and Klingler," recalled Sing. Klingler had scored a hat-trick against Slovakia.

Football disappointed the Nazis, yet it was never that important to them, explains Wolfram Pyta, professor of history at Stuttgart University, in a wonderful essay on German football. The Nazi idea of the German nation revolved around soldiers. They were the national heroes. Footballers were scarcely relevant, Pyta says.

The former US secretary of state, Henry Kissinger, spent his childhood in Nuremberg and, like many German boys in the 1930s became a football nut, though a contemporary remembers him as a terrible player. In a famous essay on football and politics written before the 1986 World Cup, Kissinger explains that German football entered the postwar era without a clear heritage. It had never been particularly good, and the national team never very significant.

That changed one Sunday in July 1954 when West Germany beat Hungary in Bern, Switzerland to win the World Cup. The Germans were captained by a former paratrooper, Fritz Walter, and coached by Herberger, now divested of swastika. The match was like a movie long before The Miracle of Bern became the top-grossing film in Germany in 2003. The Hungarians, unbeaten for years, went 2-0 up after only eight minutes, but the Germans drew level in the next 10, and scored the winner six minutes from time. There were then only about 40,000 television sets in Germany, so tens of millions of people on both sides of the Wall listened to the game on the radio. Many had never heard a football match before. The final whoops of the radio commentator Herbert Zimmermann - "Aus ["over"]! Aus! Aus! Aus! The game is over. Germany is world champion!" - entered the national memory.

An 11-year-old pastor's son named Friedrich Christian Delius listened to the game that day. Later he wrote a novel called The Sunday I Became World Champion. "I still feel a personal, speechless feeling of victory," Delius explained, "and I am not alone. For us children the victory was a liberation, perhaps because our fathers, who had survived the war, could finally permit themselves to appear more relaxed and happy."

Every German of a certain age now has a story of that day. When I asked Bernd Holzenbein whether playing for the German team that won the World Cup in 1974 had been the highlight of his life, he replied: "Just like everyone I saw the final of '54, as a small boy, on the only television set within a radius of perhaps 10 kilometres. Those players were my idols. I devoured Fritz Walter's books. 1954 was a symbol of German resurrection. 1974 was less important."

No doubt the significance of Bern has become stylised in the retelling, particularly in the 1990s when Germans began digging up the happier bits of their recent history, but something momentous did happen that day. The phrase associated with it is, "Wir sind wieder wer" (We are someone again). Finally postwar Germans could be proud of Germany. Yet how could the national team come from almost nowhere to captivate the nation? Pyta says it's because the country had lost all other national symbols. The flag, anthem, militarism and past heroes had been discarded. Germany was the first nation-state without public nationalism - until that Sunday in Bern. Pyta goes so far as to call that match "the founding myth" of the Federal Republic.

The victory became a clunky dance between the new and old Germanys. All over Germany, when the tune of the national anthem was played to celebrate victory, crowds sang the forbidden lines, "Deutschland, Deutschland uber alles". Bavarian radio broke off its live coverage of the team's victory celebrations in a Munich beer cellar after the president of the German Football Federation, Peco Bauwens, began a eulogy to the "Fuhrerprinzip" (the Nazi idea of leadership).

And yet a new kind of German nationalism was born that day. Germans could now unite, in a quieter low-key postwar way, around their football team. Besides the D-Mark it was the one national symbol they were permitted.

Many artists contemplating postwar Germany turned naturally to Bern. Subversive filmmaker Rainer Werner Fassbinder used it in the magnificent finale of The Marriage of Maria Braun. Maria, a dance- hall courtesan turned successful postwar businesswoman, blows herself up in her mansion by lighting a cigarette in the gas oven, while from the wireless set behind her Zimmermann celebrates German victory: "Aus! Aus! Aus! Aus!" To Fassbinder, any German resurrection was suspect.

Gunter Grass, Germany's Nobel Prize- winning novelist, later included the Bern match in his collection My Century. "What would have happened to German football," muses Grass's character, if Hungary's late equaliser had not been disallowed for offside, "and we had again left the field defeated rather than as world champions... "

The answer is that the German football team might never have become such a symbol of Germany. This could have happened: the national teams of Italy, Spain, France and Russia don't have nearly the following that Germany's does. The German team won the World Cup again in 1974 and 1990, yet it never quite escaped the shadow of Herberger. After the war he had decorated his house with pictures of the Christian Democrat chancellor Ludwig Erhard and his favourite Social Democrat politician Herbert Wehner, and continued to coach Germany until 1964. He then handed over to his anointed successor Helmut Schon, who had played for Germany under him in the Nazi years. Schon kept the job until 1978, when he handed over to his anointed successor Jupp Derwall. In other words, there was a long continuity in the era that had begun with Herberger in 1937.

This mattered because the German style of play even today remains the lovechild of Herberger and Nazism. The way a country plays football is often said to reflect enduring national characteristics, but in fact it can be suddenly created. Before Nazism, the Germans seem to have played a soft, slow and skilful football. Then they were subjected to 12 years of rhetoric about war, valour, strength and above all Kampf, a word so central to the Nazi mind that Hitler used it in the title of his autobiography. Kampf literally means "struggle", but even before Nazism the German word was used with far greater frequency than the English one. A battle was a Kampf, any attempt to do anything difficult was a Kampf, and the Nazis often described life itself as a Kampf (often a Kampf for existence). During the war the nation's press was filled each day with the manly sacrifices of the Kampfer at the front.

The word was also obsessively overused in German football during the Nazi years. A match was a Kampf, a battling footballer a Kampfer, and to play in a battling manner was kampferisch. After Germany lost to Sweden in 1941, Herberger noted: "The forwards are too soft! No Kampfer!! Against Sweden one can only win with strength and Kampf, speed and hardness!!"

Men in German football imbibed this sort of talk for 12 years. Here is Fritz Walter writing about a wartime game between his air force team, the Red Hunters, and a Cologne side: "Both goalkeepers are under constant fire... The Hunters' defenders... defuse the dangerous projectiles. Leine's 'bomb' [a hard shot] whizzes narrowly past the post... The men of Cologne carried their hopes of victory to the grave." Many match reports of the Nazi era read like this. Aspiring German players learned that soldierly virtues were valued most. When Walter joined the army he received a letter from Herberger saying "A good footballer is also a good soldier!" The Nazi atmosphere inevitably made the German team's style more aggressive and kampferisch.

Germany's postwar leaders tried to eradicate the cult of the soldier. The army was all but abolished, references to dead Kampfer frowned upon, and the word "Kampf" itself began fading from the collective vocabulary. But long-established cults don't suddenly disappear. Moreover, Herberger was still running the national team, and he perpetuated Kampffussball. He won in Bern with a team of Kampfer who defeated the more skilful Hungarians in the mud (the image of the trenches of the Great War escaped few observers).

The German game remains characterised by Kampf, strength and never giving up. Generations of the country's footballers have been raised in a style of play set under Hitler. The military antecedents of this style are now forgotten, and would be considered an embarrassment if remembered, but they live on in players' nicknames. The great striker Gerd Muller was "der Bomber", any decent playmaker is a "Feldmarschall", and Franz Beckenbauer, greatest German footballer of all, was "der Kaiser" - monarch and soldier in one. This soldierly tradition disappeared from German life but perpetuated itself in football, simply because in football nobody ever felt the need to eradicate it.

But Herberger didn't build a great tradition on Kampf alone. He set a perfectionist tone that survived until the 1990s. A whiff of farce clings to almost every England manager, but in Germany, as the Suddeutsche Zeitung newspaper once noted, manager of the national team has always been "a title that rings with respect, rather like head of Deutsche Bank or president of the Constitutional Court". The German team was an institution with its own initiation rites. In the Nazi years, a novice international would be greeted with a practice known as the "Holy Ghost", which seems to have consisted of the whole team pulling down his trousers and smacking him on the bottom.

The German team stood for a standard of excellence. True, there was booze, poker and illicit sex (in 1980 a Montevideo prostitute was asked at gunpoint to hand back $100, the amount by which she was judged to have overcharged a player) and players were also always squabbling. But that was the consequence of throwing together driven personalities. Everyone - the manager, the press, the players - demanded excellence. The German habit of scoring in the last minute, playing worse but winning, and winning on penalties, were nothing to do with luck but with concentration and drive. Striving to meet the standard of excellence, nobodies won World Cup medals.

The world championships of 1954, 1974 and 1990 were milestones in German nationhood. Each was celebrated on both sides of the German border. A few fans in East Germany even travelled to West Germany's games whenever the team ventured behind the Iron Curtain. One of them was Helmut Klopfleisch. The country's secret police, the Stasi, sparing no expense, would go with them. "K., by his behaviour at the People's Republic of Bulgaria vs. the Federal Republic of Germany, has significantly damaged the international reputation of the GDR," an agent reports sadly in a note in Klopfleisch's thick file. The agent mentions a number of other football dissidents who likewise blotted East Germany's noble reputation. In 1989 Klopfleisch was expelled from East Germany. He told me: "I spent 41 years of my life in the GDR, and now it feels like wasted time, though we lived then, and had fun sometimes. And, you know, it was a real consolation that West Germany were so successful. They always beat eastern teams. That meant a lot to us."

It meant a lot to millions of Germans. Yet most of them expressed their pride quietly. When I asked Lothar Matthaus, who has played the most games for Germany, whether it moved him to represent Germany, he said: "It's an honour to represent a whole country, such a big country where so many people play football. I don't feel any more than that." Germans of Matthaus's age (born in 1961) rarely do nationalism. Pyta describes watching a German team during the national anthem before a match: "Not one moved his lips to sing along." Most were not familiar with the third line of "Das Lied der Deutschen".

These German football teams traumatised their neighbours. The worst memory in French football history is the defeat to Germany in the semi-final of the World Cup of 1982. A recent French documentary about the match featured the now middle-aged French players standing around in their civvies on the fateful field in Seville re-enacting the goals.

The worst Dutch football memory is the lost World Cup final of 1974, recently mourned in a bestselling book. The worst English memories are probably the defeats to Germany in 1970, 1990 and 1996, summed up by the phrase "Thirty years of hurt" in the English football hymn "Football's Coming Home".

For years, fear of the German football team was intertwined with fear of Germany. The country was the largest in Europe, its economy wouldn't stop growing, and who knew when it would next start a war? That fear prompted Margaret Thatcher and Francois Mitterrand to try to block German reunification after 1989. Germany's victory in the 1990 World Cup seemed of a piece with its general dominance.

I came to live in Berlin as a student in September 1990. A week later, on the evening of October 3, I wandered down the Unter den Linden in Berlin to see Germans celebrating reunification. The country was about to become a superpower. Franz Beckenbauer, Germany's victorious manager that summer, had said that with East German players about to become eligible, the national team would be "invincible for years to come". The Unter den Linden was full that night, but apart from a few East Germans downing champagne, most people were wandering around quietly too. Like me, they seemed to be just looking. Walking down the most pompous boulevard of an empire on the night of its greatest glory, you seldom realise that this is the moment that the empire starts to collapse.

Since then Germany has become a country with a stagnant economy, a skeleton army, and a laughable football team. Germany has not won a prize or even a European Championship match since 1996. It has not beaten a front-rank nation since defeating England at Wembley in 2000. Having sufficed with two managers from 1937 to 1978, Germany has been through so many recently that in 2004 Spiegel magazine printed an application form for its readers to send in: "You want to manage the German national team? No problem!" The job went to the former German international Jurgen Klinsmann. He has not only continued losing while living in California, but also intends to get rid of the legendary German white shirts with the black eagle, thus stripping the team of all remaining mystique.

The German decline is mind-boggling for a country of 82 million people with three World Cups in the cupboard and whose football federation claims to be the largest sports body on earth with 6.3 million members. It can only be explained by the loss of Germany's competitive advantage: other countries discovered Kampf.

Herberger made the Germans the fittest and hardest-working footballers on earth. But later their rivals began looking after their bodies: British footballers cut down on the beer, the French began to tackle, and big Italian clubs now have medicine cabinets the size of small hospitals. It then emerged that the west Germans could not compete on technique or grace. "Germans dance like refrigerators," lamented the team's then coach, Berti Vogts, in 1998. By far the most skilful player in the current side, Michael Ballack, is not by chance an east German. Ballack was raised under the old Communist system in Karl-Marx-Stadt (now Chemnitz) where he was forced to do daily repetitive drills using both feet. It paid off.

The other players are so poor that Germany entered the last World Cup as perhaps the first team in history built around a goalkeeper, Oliver Kahn. They have now slipped to 22nd in football's world rankings, though looking on the bright side, as Klinsmann always does, they still remain well ahead of American Samoa in 205th place. And in a generation's time, with Germany's collapsing birthrate, 22nd place will seem quite commendable.

The Germans have learned to laugh at their team. They have mastered the ironic self-flagellation that used to be an English speciality. The German establishment, too, seems to accept the team's collapse. It is not seeking victory in the coming World Cup. German football tried victory, and it only irritated the neighbours. The goal this summer is to charm them. The slogan of the World Cup is "A time to make friends". The event's logo is a laughing face - a "smiley", in internet jargon. The former interior minister Otto Schily admits: "A cheerful Germany, that's not necessarily what people associate with us."

Meanwhile the German advertising man Sebastian Turner is running a campaign to promote Germany worldwide, called "Land of Ideas". He told me: "Country images are extremely stable. They are probably the most stable images you can have." But this World Cup will be the biggest media event in history, and 20,000 foreign journalists will show up in Germany, many of them without match tickets. It's the country's chance to remake its image. Turner explains: "The Thailands of the world don't care much about Germany, and they are probably right. After these weeks they won't think of Germany again."

This summer Germany can rebrand itself as a people of smileys who invented the book, the aspirin, the Porsche, the modern football shoe and so on. But if the Germans really want to remove the last vestiges of fear of Germany, they know what to do: keep losing football matches.

Deutsche Börse merger proposal (FT)

Deutsche Börse Releases Economic Details of Euronext Merger Proposal

Shareholders to receive combination of shares in NewCo and cash/ Synergies of 300 million euros p.a. before 60 million euros customer benefits

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Deutsche proposes $11bn merger with Euronext (FT)

Deutsche Börse on Tuesday outlined the details of its merger proposal with Euronext, a cash-and-stock “merger of equals” that values the pan-European exchange operator at €8.62bn ($11bn), topping the bid made a day earlier by the NYSE Group. read the article

Merkel draws promise of action from China on piracy (FT)

China will take fresh measures to fight product piracy, Wen Jiabao, prime minister, said after a meeting with Angela Merkel, the German chancellor, on Monday, conceding that there were still “many problems” in the area.

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Germans rush to float on wave of enthusiasm (FT)

Germany’s smaller and privately owned “old economy” companies are rushing to list on the stock market.

They have been spurred on by enthusiasm from US and German investors for the recent acquisition spree by the country’s industrial heavyweights.

Bauer, the construction company, Klöckner & Co, the steelmaker, and Demag, the crane manufacturer, are among a growing number of companies considering public listings in the coming months, according to people close to these groups.

“Like the big, listed entities, these companies have done their homework in the past few years,” banker. “They have restructured. Investors are keen to give them money to grow, just like they applauded recent takeovers.”

The deals signal the growing for public equity rather than German debt-financing. But the creeping revolution is not principally being led by the companies’ traditional owners.

The driving forces behind most of the pending initial public offerings are private equity houses or investment funds. These professional investors bought stakes in the late 1990s and want to realise a return on their investments.

US private equity house Lindsay Goldberg & Bessemer owns Klöckner, rival KKR controls Demag, while Germany’s DBAG owns part of Bauer.

Many of the companies in Germany’s blue-chip Dax index have marked the end of restructuring by spending billions on strategic acquisitions in the past year and most have been rewarded with steady share price gains.

“A year or two ago, people were defensively focusing on dividend yield to make sure investments made a minimum return,” one banker said. “Now they’re more optimistic, looking to put their money into growth.”

The bankers are so confident that some clients are preparing for market debuts during next month’s football World Cup in Germany. “Even the football fans in the market will be happy to get some diversion,” one lead manager said.

Investors’ appetite for German shares appears strong. The Deutsche Börse has seen 17 offers worth €2.7bn ($3.5bn) since January and bankers now forecast a tripling of deals by the end of the year. This compares with 25 public offers totalling €4.1bn in 2005.

Bankers are confident these listings will be a success even though investors have proved picky. Shares in Air Berlin, the budget airline, fell following their market debut last week. www.ft.com/ipo

Wolfgang Munchau: Germany’s need for growth (FT)

There was a time, not too long ago, when the US president and the German chancellor agreed that the German economy should act as a “locomotive” to stimulate global demand.

There is no chance that George W. Bush and Angela Merkel could have held such a discussion at their recent summit in Washington. Global economic demand management has been out of fashion for a while. The notion of a locomotive arose out of the 1978 summit of the Bonn Group of Seven leading industrial nations. Helmut Schmidt, the German chancellor at the time, was a reluctant convert to the idea. He worried that it might overburden Germany’s economic capacity.

From the point of view of the world economy at large, Mr Schmidt was probably right, especially considering that only a year later the second oil crisis triggered a global recession. Yet it is debatable whether the policy, which led to boom and bust, was best for Germany itself.

Nowadays, it would be trivial to say that Germany no longer acts as a global economic locomotive. A less trivial point is that Germany barely fulfils such a role even inside the eurozone.

There are two reasons for this. First, Germany’s political class is more inward-looking than the generation of politicians who governed in the 1970s. Second, its current economic establishment is more contemptuous of macroeconomic demand management than that of any other western nation. This extreme position is largely ideological. It may also have been influenced by the “locomotive days” of the late 1970s.

Since Germany accounts for one-third of the eurozone’s gross domestic product, it should come as no surprise that the recent German recovery coincides with that in other parts of the eurozone. Italy, in particular, is heavily dependent on Germany for its export growth. It is therefore no accident that the Italian economy has recently picked up in tandem with Germany.

But the present recovery is hardly solid. Germany continues to underperform the eurozone average. During the first quarter of 2006, German GDP grew by only 0.4 per cent, after zero growth during the fourth quarter of 2005. These data flatly contradict exuberant German confidence indicators and business surveys. There has been a persistent gap between business sentiment, which has been improving, and consumer sentiment, which has remained depressed.

The reason for this gap lies in Germany’s national economic strategy, which consists of two planks, both of which aggravate Germany’s potential role as an economic locomotive: budgetary consolidation and a beggar-thy-neighbour real devaluation inside the eurozone as Germany improves its competitiveness through wage moderation.

One could make a case for budgetary consolidation during a cyclical upswing, but a systemic policy of real devaluation is destructive from the perspective of the eurozone as a whole. According to the European Commission’s spring forecast, Germany’s real unit labour costs will decline by 1.6 per cent this year and by a further 2 per cent next year, having already declined during 2004 and 2005.

As the economy goes through a cyclical upswing, one would have expected the period of wage moderation to come to an end. But the opposite is the case. Real wages not only continue to decline, but do so at an increasing rate. No wonder domestic consumption is so weak. If people expect to earn less money in future, they hold back on consumption today. German consumers act in a far more rational manner than they are usually given credit for.

This trend is reinforced by the present grand coalition’s economic policies. It has a clearly mapped-out strategy of tax increases – witness the commitment to raise value-added tax from 17 to 20 per cent. But it has no strategy for growth and employment – except to rely on this year’s football World Cup in Germany as a potential stimulus. I would put the chances of a further appreciation of the euro against the dollar higher than the probability of Germany winning the World Cup. The exchange rate has a far greater potential for damage than a short-lived football boom could ever compensate for.

The eurozone economy is facing a simultaneous rise in interest rates and the exchange rate. Monetary policy will continue to get tighter for the next two years. Jean-Claude Trichet, president of the European Central Bank, said last week that the eurozone was already growing at its potential rate – around 2 per cent per annum. As far as the ECB is concerned, this is as good as it gets. If it were to get any better, the ECB can be safely relied upon to restore “order”.

Germany has lost its role as a European and global locomotive not out of necessity, but out of choice. If this recovery turns out to be relatively short-lived, perhaps the country’s political establishment will find the courage to formulate an intelligent strategy for sustained growth in the future, just as happened in the late 1970s. Of course, it is perfectly legitimate to question the G7’s policies at that time. Mr Schmidt’s locomotive may not have quite reached the desired destination. But Ms Merkel’s train has not even left the station.

Deutsche Börse woos Euronext with new offer (FT)

Deutsche Börse has put a package of merger proposals to its smaller rival Euronext, aiming to ease shareholder concerns that a merged entity could be dominated by the Frankfurt group. read the article

Deutsche Postbank: Getting products to the market faster (FT)

Replacement of core banking systems is regarded as complex, risky and expensive and, understandably, such projects among large banks are extremely rare. But for Deutsche Postbank, one of Germany’s largest retail banks with more than 14.5m domestic customers and total assets of €140bn, the decision to replace its system with SAP’s version in 1999 has proved beneficial.

Postbank was using Kordoba, an ageing system developed for the German market by Siemens. As it was designed for medium-sized banks, Postbank needed 14 systems running in parallel. Maintenance, cost, flexibility and the age of the technology all became issues.

Postbank chose SAP to supply its new system even though, at that time, it lacked some important features such as support for multiple delivery channels and risk management. “We were looking for a flexible and modular standard software. We also needed an established player who understood the German banking environment and with whom we could maintain a long term relationship,” says Dr Thomas Mangel, a member of the management board of Postbank Systems.

Postbank and SAP agreed a co-development strategy aimed at providing the bank with a modern core banking engine, and the vendor with an enhanced system that it could later offer to the market.

Teams from SAP and Postbank began development work in late 1999. “We adopted a phased rollout approach to minimise the risks of the overall migration effort,” explains Rainer Fassnacht, General Project Manager SAP, at Postbank.

In 2002, the bank went live with a centralised application for storing and managing all customer information. A year later, it switched all 4.5m cheque accounts over to the SAP system, mortgage accounts were migrated in 2004 and in 2005, Postbank moved 17m savings and deposit accounts to SAP.

“We have successfully replaced the 14 Kordoba systems and are now only running on SAP,” says Fassnacht. He adds that despite the phased migration, each step felt like a ‘big-bang’ wholesale migration. ”A project of this magnitude and duration which involved intensive testing in a live environment is immensely challenging. To be successful, it is very important to not only have top management commitment, but have a buy-in from the entire organisation,” says Dr Mangel.

Postbank’s new core banking solution is now the basis for its multi-channel architecture and has successfully reduced the time to market for new financial products and services for its customers. Furthermore, the bank has simplified its IT by re-engineering processes and consolidating data centres.

Postbank spent more than €200m on the core systems replacement project, but Dr Mangel says the payback is the reduction in overall process complexity.

Christian Goeckenjan, VP Financial Services at SAP, says: “Banks have realised that all their processes, while they may be highly complex, do not necessarily add much value to the organisation. A core systems replacement project provides banks with an excellent opportunity to streamline and re-engineer their back office processes.

“At Postbank, for instance, the number of deposit related processes have reduced from more than 120 to 35 which has positively impacted the bank’s profitability.”

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German bosses face shorter contracts (FT)

The long contracts awarded to German senior executives could be shortened if reformers on the government’s corporate governance commission force through proposed changes next month.

According to the agenda of the Regierungskommission Deutscher Corporate Governance, which holds its next meeting in Berlin on June 22, the 13-strong panel is to debate a proposed shortening of contracts from five years to three years, a move that would shift Germany more into line with international norms.

If the motion is passed, companies would have to comply, or explain why they should be exempt.

International corporate governance standards have been making steady inroads into Germany in recent years, as foreign investors increasingly make their presence felt. Last week, Hermes, the activist UK pension fund, led a revolt against corporate governance at Volkswagen.

The length of senior executives’ contracts has traditionally been seen by German companies and executives as a defence against being ejected from their jobs. Executives are typically paid for the remaining portion of contracts if they leave early.

Last year, Werner Seifert, Deutsche Börse’s chief executive, walked away with a €10m ($12.7m) pay-off after being forced out by rebel investors.

Clemens Börsig, Deutsche Bank’s finance director, recently agreed to move from the role of finance director to supervisory board chairman – in part, according to people close to him, because he would receive the four years’ entitlement remaining on his executive contract alongside his chairman’s pay.

Reformists on the commission, such as Christian Strenger, a board member at fund management house DWS; Ulrich Hocker, head of the DSW small shareholders’ association; and former Deutsche Börse executive Volker Potthoff, are pushing for urgent change.

Mr Potthoff said: “German contracts should move into line with international norms. In that context, three years is more appropriate than five.” UK best practice is now a one-year contract.

International governance experts dismiss claims that a period of less than five years is insufficient for chief executives to prove their strategies.

David Dando, a director at Georgeson Shareholder Communications, a firm specialising in proxy voting, said: “Investors would always give chief executives two or three years to prove themselves. But to get a five-year pay-off if they’re not performing is absolutely generous.”

Since the commission’s most controversial reform, that covering the disclosure of executive pay, companies are now forced by law to “comply or explain”, following new legislation last year.

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German consumers fear worse times ahead (FT)

Why don’t Germans spend, borrow and consume like their US counterparts? Dawdle for an hour or so over coffee in the food court at the US Army’s Cambrai-Fritsch Kaserne in Darmstadt, southern Germany, and the conundrum transfixing Europe’s biggest economy becomes a little easier to understand.

“It is the American mindset – it is about more material things,” says a 32-year-old from New Jersey who works in administration at the base and gives her name as Holly. “Americans will gauge their success more on what they have at home, rather than how much they have in their bank account,” adds her friend Kari Gallagher, 28, from Michigan. “My German friends buy one good shirt, not five. They do worry about money more than we would.”

Their casual reflections on the relationship between shopping and the national psyche may contain more wisdom than they realise for policymakers grappling with Germans’ stubborn refusal to spend.

With business confidence at a 15-year high, according to last week’s closely watched Ifo institute survey, this reticence is frustrating politicians and central bankers alike. The European Central Bank argues that it has done all it can to boost growth by delivering low interest rates and low inflation. There are indeed signs that export growth is feeding through into domestic investment spending.

But how has the German consumer reacted? Retail sales fell unexpectedly by 2.7 per cent in March, according to data on Friday that pointed to only a modest bounce-back in consumer spending in the first quarter after the weak last few months of 2005.

Consumer confidence indices suggest morale is improving – but those are not necessarily good forward indicators of actual expenditure. And after four years of weak growth in, or even falling, consumer spending, the mood could hardly have worsened. Since the exceptional period immediately after unification in 1990, German consumer spending has never matched the pace in the US or UK.

“The darkest hours may be behind us,” says Dirk Schumacher, economist at Goldman Sachs in Frankfurt, “but it is too early to get excited about German consumption.”

The result is a lopsided German recovery. Even the most optimistic forecast sees overall economic growth rising scarcely above 2 per cent this year. The International Monetary Fund is predicting just 1.3 per cent: hardly what the US or the UK would call a boom. Worse, the Berlin government’s plans to raise value added tax by 3 percentage points next year will slam the brakes on consumer spending and gross domestic product growth in 2007 – although arguably some spending may be accelerated in anticipation of higher prices ahead.

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Deutsche Bank looks for acquisitions as profits soar (FT)

Deutsche Bank became an undisputed bulge-bracket bank yesterday, after trouncing expectations for first-quarter performance, with record profits and a 40 per cent pre-tax return on equity.

Hailing the result as “outstanding”, Josef Ackermann, chief executive, said in an interview with the FT that he was interested in cementing Deutsche’s strength through acquisition. “Retail [banking] is primarily where I see opportunities for acquisitions,” he said. “A deal could be anywhere between €1bn and €5bn, but I also would not exclude something bigger if it makes strategic sense.”

Mr Ackermann said future growth would not come at the expense of regulatory slip-ups. There would be a “zero tolerance” approach to transgression, he said, in response to last month’s £6.4m FSA fine for market misconduct.

On the outlook for the year, Clemens Börsig, Deutsche’s finance director, who on Thursday moves to the role of supervisory board chairman, said the bank could “revisit [its] targets in the second half”, possibly upgrading the current 25 per cent ROE and double-digit earnings growth targets for the year. Analysts at Citigroup said ROE could be 30 per cent.

In the first three months of the year, Deutsche’s net profits surged 55 per cent to a record €1.7bn. The result, underpinned by strong market conditions generally, got a particular boost from rapid growth in equities sales and trading, and from corporate advisory business.

Deutsche executives said the figures catapulted the German bank into the top league of global investment banks, with only Goldman Sachs generating superior, though riskier, returns.
Huw van Steenis, analyst at JP Morgan, said: “This just underscores that Europe, Asia and emerging markets are outgrowing the US.”

Deutsche’s equity sales and trading revenues jumped 90 per cent to €1.6bn, driven by growth in equity derivatives and emerging markets. Advisory revenues rose 58 per cent to €180m. In retail banking, there was an 11 per cent increase in revenues to €1.3bn thanks to sharp growth in private client investment activity.

Overall, in corporate and investment banking, Deutsche saw underlying pre-tax profits rise 33 per cent to €2.1bn. In retail banking and asset management, profits rose 37 per cent to €558m.
But Mr Ackermann will be given little time to bask in the figures. The criminal court in Düsseldorf said last month that it wanted to begin a retrial of the long-running Mannesmann case in the summer.
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Deutsche Telekom stakes out role in telecom consolidation (InfoWorld)

DT open to acquisitions to maintain its position as Europe's largest telecom provider read